Recession Hits Gaming Industry

It is a widely held belief that the video game industry will prosper during the recession. Much as the film industry prospered during the great depression. And there is much evidence to support that view with industry turnover well up on last year and the console platforms selling in record numbers. It all looks rosy. And I believe that the industry will do better than most over the coming months, however there are some massive caveats.

For a starter, just now people are enjoying their last Christmas blow out before facing the inevitable. And unemployment is going to rise very sharply in the new year. So things will probably drop back a little from the current high, even allowing for seasonal factors.

Secondly, retail will not do as well as the industry as a whole. This is because gaming is going online. Which includes content delivery, subscriptions, micropayments, advertising and other business models. All of which do not involve high street retail. So retail must, inevitably, fall away sharply from the peak that this Christmas will be.

Thirdly, whilst two of the platform holders are running with good profits, there is one, Sony (SNE), that is in deep trouble. They have gone from being the leading brand in the last generation to being third and last in this generation. And they are falling further behind with each passing day. Their stock price is in free fall and they are making 16,000 redundancies. This is not good for the industry because Sony bring a lot to it.

Fourthly, there will be a different profile as to what sells well. Hyped up hits, often with licensed IP will not do so well. People will be more discerning with their spend, buying solid, quality titles with many hours worth of play. We are already seeing this effect and the game sales charts are looking a lot different to what people were expecting.

Fifth, with less money around people are more likely to steal games. There will be a far higher incentive for piracy. So industry revenues could be severely hit, even though their products would be reaching more people.

Sixth, the Wii bubble could very well burst, for a number of reasons that have already been explained on here. The occasional, very casual “toy” user will be more careful with their money. It is the regular, consistent gamer who will keep going most through the bad times.

Seventh, we are at the beginning of a netbook explosion. These things are going to sell in many tens and eventually hundreds of millions. People will move away from spending time with consoles to spending time with netbooks. So online PC is going to grow massively at the expense of the three big console platform holders. Home and mobile gaming consoles will be hit. This is where I would invest money in gaming right now.

So we are looking at interesting times over the next two years, but then this industry is never boring.

Disclosure: None

Comments

[msilly:]

Another stupid article from this supposed expert
Tool!

2008 Dec 18 04:40 PM

[dreamhunk:]

pc gaming will not be affected because there is just too meny free good games out there. there is already some console game companies going bankurt. Like midway and radical.

the only I have seen on the pc gaming side is some companies laying off people. None of the really strong pc game companies are going banurpt unlike console game companies.That said there is a few mmo's that are being closed down.

However pc gaming has created jobs and new companies. In fact there is a few new companies and tittles coming to the pc.

The production cust of games on consoles already high and killing a lot of companies on console. It so bad that these companies need to go multiplat to make profit.

2008 Dec 18 05:45 PM

[anti-cranky:]

Bruce,

I think your spot on in your analysis of the gaming buisness. A couple of comments:

If "PC-lite" games become big on netbooks do you think this will benefit the xbox since it is direct-x based.

Anecdotally, my household (12 year old twins) seems to buoy your theory of the WII bubble. My kids have had the WII for a year now but they are not playing it nor are they requesting games for the WII. The Xbox gets all the play time and my kids are only asking for xbox games… The music playing games are big right now.

2008 Dec 18 07:34 PM

[SuperGamer54:]

I heard that the PC market is worse than the console market. You are right about the Wii it is a big scam. I was so excited to buy a wii but then after I played a few wii games I was disappointed because it was so short and I thought that the Nintendo Gamecube predecessors are better. I buy more games for my playstation 3 ( even bluray movies) because I like the graphics, the length, and most importantly the free online play that comes with most Playstation 3 titles. Bluray would of never existed if it wasn't for the playstation 3 so this console is no failing business model. If you look at November software sales for the Playstation 3 you could see that Xbox 360 sale are only $60,000,000 more than the playstation 3. At that rate the Playstation 3 could outsell Xbox 360 software sales by 2009. I think why that is is because that there are more psn users(15,000,000) that could play games online than there is Xbox live users(14,000,000) that can play games online. Now software developers like Quake's John Carmack said that there new titles like Rage are going to be graphically better for the Playstation 3 than the Xbox 360 because there is more memory in the Bluray disc to store more textures than the Xbox 360's Dvd format. Even the levels in killzone 2 are 2.5 GB per level they even said that " Bluray is a necessity". I think as game developers start maturing they are going to make more graphically intensive games to stay competitive. It takes memory to make a graphically immersive game so more third party developers will be working on the Playstation 3 starting at the middle or end of 2009.

2008 Dec 20 05:55 PM

[xinmart:]

Always say opinions, not facts.

What kind of analyst is that ?

2008 Dec 22 03:33 PM

[News Trend:]

I think the magic of the WII can not be seen by an experience gamer or gaming insider. For the unexperience gamer the WII is magic. So what? Because it will bring in an entirely new demographic that has so far been untapped -- women, younger children, 40-somethings who didn't grow up on video games. Even my 90 year old grandmother plays it in the nursing home for exercise. I would never before have considered buying a video game -- no I would do it for my physical health.

2008 Dec 26 01:07 AM

[News Trend:]

Wii is a gateway drug.

2008 Dec 26 01:09 AM